Aftermarket Service Pricing: How to Strike a Balance (Linkedin Live On-Demand)

Recently, Hilbrand Rustema, founder and managing director of Noventum Service Management, sat down with Erik Kjellstrӧm and Sarang Sambare from Syncron to offer valuable insights into aftermarket service pricing, structuring service contracts and the evolving landscape of service offerings.

Here are some key takeaways from their discussion.

Service organizations are transitioning, and outcome-based services are rising

Service organizations are undergoing a number of changes, and every organization is at a different phase—moving from reactive to proactive and predictive. There’s also the transition of moving a service organization from a cost center to a profit center. From a service delivery perspective, there’s a shift in approach from product-centric to comprehensive solution offerings.

Companies are increasingly offering outcome-based services, focusing on what customers can achieve with the equipment rather than specific services. This focus requires a shift in how service organizations deliver and measure value.

Prioritize digitalization to optimize service delivery

Developing digital ecosystems around equipment and services can create new business models and opportunities. Leveraging the right technology and data analytics can enable predictive maintenance and proactive service delivery.

During the LinkedIn Live, Rustema, Kjellstrӧm and Sambare discussed AI’s significant potential for service organizations. “One of the interesting things that we’ve found in our research looking at the potential impact of AI for companies is that the productivity potential, particularly in service, is huge,” said Rustema. “In a couple of use cases, we were looking at numbers like 30% productivity improvement, which is spectacular.” While this data is promising, for service leaders, it’s a matter of figuring out which tools will have an actual impact on your business.

Differentiating the customer experience is paramount

Different types of customers have distinct needs and expertise levels, so service organizations must differentiate the experience they’re offering to their customers. Businesses must determine what’s valuable to their customer base and what type of experience they want. Doing so allows them to tailor their services based on these needs and preferences.

“The challenge for product-oriented companies is to stop focusing on the product and put more effort into finding out what the customer really needs in terms of services and what is valuable to their business,” said Rustema. “You can sell the same product and the same spare parts, but there’s no such thing as a standard customer.”

Service contracts require a balance of standardization and personalization

Service contracts are your roadmap to customer satisfaction. They should be structured to clearly define service expectations, providing a transparent understanding of what customers can expect. However, striking the right balance between standardization and personalization in service contracts is crucial. While personalization is necessary to meet individual customer needs and preferences, excessive variations can lead to cost overruns and reduced scalability.

Outcome-based pricing drives value

“Don’t underestimate the power of pricing,” said Kjellstrӧm. “Pricing for services is key.” Outcome-based pricing for aftermarket services is a powerful driver of value. Service-level agreements quantify value as much as possible, but there are intangible benefits that service organizations need to account for as well. Effective pricing strategies can help service organizations finance investments and drive profitability and value. The entire customer experience has to evolve alongside the shift to outcome-based pricing.

Service contracts and offerings are rapidly evolving, and organizations must adapt to meet changing customer expectations and market demands. Balancing standardization and personalization, optimizing pricing and embracing digital transformation are vital steps in driving growth and profitability.
To delve further into the world of aftermarket service pricing and unlock valuable insights from industry experts, explore the full discussion in our LinkedIn Live recording.